Banking is a people business. Customers may “come first,” but employees are a bank’s most prized asset in today’s knowledge-driven world. In knowledge-driven industries like banking, organizations often spend upwards of 50 percent of their costs on talent to ensure a sustainable capacity to deliver for customers, and prepare for the changes just over the horizon.
Despite the widely understood value that people bring to a bank, many institutions are still relying on suboptimal processes for finding and hiring the right talent. From sourcing to interviewing, banks all too often underestimate the value created by a rigorous hiring process—one in which the characteristics being selected for have been determined in a scientific manner and are evaluated using a formal data-driven process.
If improved hiring is known to create so much value, then why do banks and other organizations consistently approach it in an unscientific, informal manner? We have identified three distinct reasons we believe that talent decisions are often handled with less care than other decisions of similar value:
- Employee performance is difficult to measure. Some measures of a bank’s performance can be expressed in widely understood ways: A return on investment of 15 percent versus 10 percent is straightforward. Measuring an employee’s overall performance is less cut and dry. What is the difference between an employee rated a 3.7 out of 5 versus one rated 3.2? The nebulous nature of performance ratings and difficulty in identifying objective metrics makes it tricky to determine the quality of a hiring decision.
- Conclusive hiring outcomes occur years after hiring decisions and, worse yet, success criteria often go undefined. It can take two months for someone to start working after they’ve been hired, another month for official on boarding, and then at least a year for the new employee to be up to speed with organizational norms and processes. That’s almost 18 months between the decision to hire and the point at which the consequences of the decision are fully realized. Moreover, we find that organizations are not always clear on how they define a successful hire and the knowledge, skills, abilities, and experience needed. All of this makes it an uphill battle to track—much less experiment with—what hiring tools and processes work best.
- Assessment overload. The landscape of talent assessments is fragmented, characterized by a large and growing number of approaches, methodologies, and vendors. Worse yet, the lack of enforced professional standards in this area means any fly-by-night operation can create an assessment and stamp it as valid. It is not surprising that clients find it difficult to identify the best assessment tools.
So, what can be done to address these challenges? Aside from recognizing the massive impact and investment that hiring decisions represent, it is important to clearly define performance in advance of hiring and align your organization’s assessment strategy with the key characteristics that matter for each role. In a recent example, a financial services firm was looking to aggressively grow headcount. They wanted to ensure that they brought in top talent in an increasingly competitive job market. By identifying the 15 factors with the highest correlation with individual performance, and then streamlining the hiring process to match, the firm was not only better able to draw in top talent, but also reduced the time of the interview process by 2.5 times, increasing cost-effectiveness.
By clearly stating why hiring well is so difficult and laying out concrete practices that can immediately move the needle on improving hiring decisions, banks can position themselves as organizations that can create sustainable value.